(Sept. 20, 2005) Chilean and Argentinean officials announced an agreement on wheat tariffs Friday. Following more than five years of tense negotiations, the agreement was greeted with mixed emotions around the country.
Chile agreed to suspend protective tariffs on 10,000 metric tons of Argentinean wheat - representing 0.8 percent of national wheat production – in return for Argentina’s agreement not to file anymore lawsuits against Chile with the World Trade Organization (WTO).
The move allows Chile to resume talks with Mercosur, the regional trade organization of which Chile is an associate, after a 2003 “stand by” was imposed on Chile pending resolution of the wheat issue.
Carlos Appelgren, Chile’s ambassador to Uruguay, praised the agreement as a step forward for Chilean business. He explained that because of the agreement, Mercosur will move forward on eliminating all import tariffs on Chilean manufactured goods to Argentina, Brazil, Uruguay, and Paraguay.
Chilean wheat and flour producers were upset with the agreement fearing that reduced tariffs will hurt production at home by driving down the price of wheat.
Even though government economist tried to assure Chilean wheat and flour producers that the agreement’s impact would be minimal, the news was greeted with protest.
“The Chilean market is very complicated and no miller will want to give up any of his business to the Argentineans” said Sergio Ossa, head of the Association of Millers. “The agreement will create competition that will cause wheat prices to fall and hurt Mill profits that are already very low.”
Manuel Riesco, president of the Southern Agricultural Consortium, promised to fight the agreement “town by town.”
The final word will now be given by an economic distortion committee who can decide whether to leave the tariffs in place for one more year, or give the green light to Argentine wheat imports.
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